Hundreds of Scottish charities have lost out on £7.7 million due to an outdated cap on lottery fundraising, a new report reveals today.

The report, ‘Small Change: how charity lottery limits impact on small charities’ by charity research experts nfpSynergy, found there has been a huge increase in funding applications from small charities to local funding trusts supported by players of People’s Postcode Lottery.

However, legislation has not kept up with increased charitable need. Since 2012 the value of total applications across Britain has soared from £5.9m to £58.3m.

But because the trusts are limited by law from raising any more money, over the last two years only three in every ten applications could be awarded funding.

The worst local UK Parliamentary constituency affected was Edinburgh North and Leith, missing out on £528,024 funding.

That was followed by Edinburgh East, which saw applications worth £510,440 rejected, and Glasgow Central which missed out on £494,902.

The restrictions meant three trusts which award grants of up to £20,000 to small and local charities across the UK were forced to turn down 3,740 applications worth £44.9m which would have qualified for awards in 2017 and 2018 – including from projects to help children with mental health and to tackle loneliness among older people.

“The government can unlock millions of pounds in extra funding at the stroke of pen by raising the current caps on charity lottery fundraising, which are which are holding back organisations from improving the lives of people up and down the country.”

Report author, Joe Saxton, said: “The current charity lottery limits are a regulatory straightjacket on charity fundraising. The lack of a government decision on raising the charity lottery limits is increasingly detrimental to charitable activities. “

A department of culture, media and sport, spokeswoman said: “Society lotteries make an important difference to communities across the country, and raise hundreds of millions of pounds every year for good causes.

“We have recently consulted on a range of options, including increasing society lottery sales and prize limits, and are considering the evidence. We will respond in due course.”